Goldman Sachs Sees Bitcoin Future in Payments Over Money

By Carter Dougherty -
Mar 12, 2014

Goldman Sachs (GS) Group Inc. analysts
see Bitcoin as an innovative payments technology while doubting
that it will evolve into a true alternative currency, according
to a research report released today.

In the report, titled “All About Bitcoin,” the
researchers write that they examined multiple views of the
digital currency by people inside and outside of Goldman Sachs.

“So where does that leave us? With the conclusion that
Bitcoin likely can’t work as a currency, but some sense that the
ledger-based technology that underlies it could hold promise,”
the report said.

Bitcoin emerged from source code written by an anonymous
developer or group of developers using the name Satoshi Nakamoto
in 2009, and attracted a following motivated in part by the
ability to escape the strictures of traditional currency,
notably government control. The report by Goldman Sachs lends
credibility to the virtual currency, said Michael Terpin, co-founder of BitAngels, a group of angel investors in early stage
Bitcoin startups.

“The tone overall is conservative and measured,” Terpin
said of the report. “People will read it and draw their own
conclusions. It’s nice they are paying attention to it, and
don’t have a Bitcoin-is-evil view.”

Biggest Hurdle

Dominic Wilson and Jose Ursua, the researchers at Goldman
Sachs who wrote the report, said that the ability to pay for
goods and services using Bitcoin is growing, saying that
“obstacles to Bitcoin being used more broadly in the payments
system are arguably not insurmountable.”

Roman Leal, an analyst at Goldman Sachs covering
information-technology services, said Bitcoin’s “biggest
hurdle” will be maintaining its cost advantage in the face of
greater regulation, higher operating costs, and competition from
entrenched players.

“While it is too early to tell how banks and payment
processors will react to the threat of Bitcoin, we believe that
it is only a matter of time before major incumbents develop a
digital currency strategy,” Leal wrote.